Over the last 25 years the Danish economy has had difficulties in growing as fast as
other EU countries and the United States. While the average growth difference is small, it
signals that if this trend persists into the next century, Denmark will not be able to maintain its
high position in the world income hierarchy. Moreover, during these years, the number of
individuals living on transfer incomes have increased dramatically. Although we interpret
both tendencies as signals of structural weaknesses, we are also aware that these developments
may reflect that other goals in economic policy have been pursued, such as protecting the
environment and/or achieving certain redistributive objectives. This paper analyzes this and
other broad policy issues of importance for Denmark.

Under existing welfare arrangements, an increase in life expectancy may pose a serious threat to fiscal sustainability, and it may have dramatic effects on the intergenerational distribution of welfare. This paper finds that such effects may be countered through a policy which links the retirement age to changes in life expectancy. Fiscal Policy, Longevity Adjustment, Ageing, Pensions,Welfare Reform.